Bullish Sentiment Soars As Oil Outages Mount

In today’s newsletter, we will take a quick look at some of the critical figures and data in the energy markets this week.

We will then look at some of the key market movers early this week before providing you with the latest analysis of the top news events taking place in the global energy complex over the past few days. We hope you enjoy.

Fossil fuels, which include coal, oil and natural gas, have accounted for more than 80 percent of U.S. energy consumption for over a century

Last year, that share dropped to its lowest since 1902 at just over 80 percent.

Natural gas consumption fell by 1.4 percent in 2017 (likely an aberration), while coal consumption fell by 2.5 percent, a modest decline after losses of 13.6 percent and 8.5 percent in 2015 and 2016, respectively.

Petroleum use increased last year but is still down 10 percent from its peak in 2005.

Market Movers

BP (NYSE: BP) was selected by RBC Capital for its “best ideas” list, with RBC upgrading the British oil company’s outlook to Outperform, citing one of the strongest growth profiles out of its peers through 2020. “The visibility around BP's volume growth to the early 2020s should reassure investors that BP does not need to raise capex materially in order to rejuvenate the upstream

Transocean (NYSE: RIG) was upgraded by Susquehanna to Positive with a $16 price target. “Offshore floater contracting activity has begun to rebound, and we believe more positive commentary across several of the companies suggests the industry is beginning to heal, and better utilization could be ahead in 2019 and 2020,” Susquehanna says.

Precision Drilling (NYSE: PDS) saw its share price surge by more than 7 percent after winning a five-year contract to build a ST-3000 drilling rig in Kuwait.

Tuesday July 10, 2018

Oil prices jumped in early trading on Tuesday on fresh concerns about supply outages. Strikes in Norway and Gabon knocked off more supply, Canada’s outage looks set to last longer than previously expected and the U.S. has reiterated its hardline stance on Iran. Brent jumped by more than 1 percent on Tuesday, putting it within reach of $80 per barrel.

Norway’s oil and gas workers on strike. Hundreds of workers in Norway have gone on strike after rejecting a proposed wage deal, disrupting production at least one offshore oil project – Royal Dutch Shell’s (NYSE: RDS.A) Knarr field. The disruption adds to the series of outages around the world and helped push up prices on Tuesday. “As a result of the strike, Knarr is closing its production in the Norwegian North Sea,” said Shell spokeswoman Kitty Eide.

Gabon workers strike. Oil workers in Gabon began a 15-day workers strike at the facilities of Total SA (NYSE: TOT) due to wage demands. Gabon produces about 200,000 bpd.

OPEC president says group is not to blame for high prices. OPEC’s president deflected blame over the recent surge in oil prices. “OPEC alone cannot be blamed for all the problems that are happening in the oil industry, but at the same time we were responsive in terms of the measures we took in our latest meeting in June,” OPEC president Suhail al-Mazrouei told Reuters. “I feel OPEC is doing its part.” The defense came in response to a series of accusations from U.S. President Donald Trump that OPEC has been manipulating oil prices.

Iran supply likely disrupted as Asian refiners cutback. U.S. sanctions are already starting to impact Iran’s oil exports as Asian refiners cutback ahead of the November deadline. South Korea is aiming to eliminate purchases in August, while Japan could cut off imports after September. “It’s the Trump administration that we are dealing with, and that unpredictability is stoking concern among refiners and petrochemical companies in Asia, making them voluntarily cut their shipments from Iran before the deadline,” Kim Jae Kyung, a research fellow at Korea Energy Economics Institute, told Bloomberg.

Syncrude Canada outage could last longer. Syncrude Canada’s 350,000-bpd outage at its oil sands facility was expected to last through July, but restoration could take longer than expected. The facility could be brought back online in phases, and full output might not be achieved until September or October.

Libya production falls to 527,000 bpd. “Today, production is 527,000 barrels a day, tomorrow it will be lower, and after tomorrow it will be even lower and everyday it will keep falling,” Mustafa Sanalla, chairman of the Tripoli-based National Oil Corp., said in a video statement posted on the company’s Facebook page. Several key oil export terminals remain offline as the army commander that took them over has decided to put them under control of a rival NOC based in the east.

Mexico’s president aims to end foreign fuel imports in three years. Mexico’s president-elect Andres Manuel Lopez Obrador says a top priority will be ending the country’s large and growing dependence on refined fuels from the United States within three years. He wants to refurbish some of Mexico’s decrepit refineries while building a handful of new ones from scratch. He also wants to halt the decline of Mexico’s crude oil production. Mexico has averaged 590,000 bpd of imported gasoline so far this year, which is up by about two-thirds since 2013.

Total to sell $1.5 billion of North Sea oil fields.Total SA (NYSE: TOT) plans on selling a third of its stake in the Laggan Tormore gas field, along with other oil and gas assets in the North Sea, according to Reuters.

Eni makes second discovery in Egypt’s Western Desert.Eni (NYSE: E) announced a second oil discovery in Egypt’s Western Desert, which raised the hopes for a “new productive area,” according to S&P Global Platts. The company will follow up with more drilling “to consolidate what can result as a new productive area for Eni in Egypt,” the company said.

Permian pipeline build raises fears of too much capacity. Midstream companies are scrambling to build out pipeline capacity to ease the bottlenecks in the Permian basin. But with several pipelines coming online at the same time in late 2019, analysts are starting to worry about an overbuild, even as the basin is suffocating today from a dearth of capacity. By late 2019, takeaway capacity from the Permian will spike, jumping by 2 mb/d. Current capacity stands at 2.9 mb/d. Until then, crude in Midland is selling at a steep discount relative to WTI in Houston or Cushing.

Tesla hikes prices in China because of tariffs. Prices for Tesla (NASDAQ: TSLA) vehicles in China spiked by 20 percent over the weekend as tariffs went into effect. The Model S price went from $107,300 last week to $128,400 now.

Half of new cars sold in UK will be hybrid or electric by 2030. As part of the UK’s “Road to Zero” plan, the UK expects that half of new cars sold in 2030 will be either electric or hybrid. By 2040, the country hopes eliminate the sale of gasoline and diesel vehicles.